African independent upstream oil and gas company SacOil on Friday received authorisation from its shareholders to proceed with the rights offer and conversion of the Gairloch debt to equity. 

SacOil intended to raise a maximum of R570-million by way of a renounceable rights offer, following which the company would convert debt totalling R238.5-million into equity. 

This paved the way for the substantial recapitalisation of the company, which was expected to be completed by January 31.

The rights offer would be supported by SacOil’s second largest shareholder, the Government Employees Pension Fund, managed by the Public Investment Corporation, to the extent of R329-million. 

The conversion of debt to equity would eliminate debt, significantly improve SacOil’s balance sheet and reduce the group’s finance costs.

Interim CEO Roger Rees said the recapitalisation opened the way for SacOil to fully pursue its exploration activities in Botswana, Malawi, the Democratic Republic of Congo and Nigeria, and was a vote of confidence in the company’s existing assets.

“The funds raised from the rights issue will be invested in the group’s existing assets, one of which, if the exploration programme is executed as planned, is expected to generate cash flows by the end of 2015,” he said.

Rees said SacOil’s Nigerian assets were between 18 and 24 months away from producing revenue, while technical VP Jordaan Fouche said the company remained confident and optimistic that the investments and expenditures on the Nigerian assets would result in reserve addition and, ultimately, hydrocarbon production.

“We are optimistic on the resources and potential exploration upside, estimated to be in excess of 20-million barrels of oil equivalent gross contingent resources. SacOil has identified a number of additional prospective leads for subsequent investigation and possible drilling,” he commented.

The company said it would continue to evaluate opportunities to secure new value-accretive acreage in established and prolific African hydrocarbon regions and basins.